Call for tax rise on pensioners to pay for care cap

In a move designed to prevent older people being forced to sell their homes, the Commission on Funding of Care and Support called for the state to cover costs exceeding £35,000.

Combined with a proposed increase in the means-tested assets threshold from £23,250 to £100,000, this would mean nobody requiring care in retirement would have to spend more than 30 per cent of their assets paying for it, the commission said.

But it also raised the prospect of a “specific tax increase” to cover the cost to the Treasury which is likely to prove contentious at a time of deep public spending cuts.

The commission said it would “make sense for this to be paid at least in part by those who are benefiting directly from the reforms”.

“In particular, it would seem sensible for at least a part of the burden to fall on those over state pension age,” it said. “If the Government decides to raise additional revenue, we believe it would be sensible to do so through an existing tax, rather than creating a new tax.”

Economist Andrew Dilnot, who chaired the commission, stressed that funding of the proposals was a political decision but pointed out that pensioners did not pay national insurance.

While seeking to address the costs of care, the commission’s proposals also included capping charges in residential accommodation for living costs such as food and accommodation at between £7,000 and £10,000 a year.

Mr Dilnot described the existing system, in which many people risk losing the majority of their assets including their homes to pay for care, as “confusing, unfair and unsustainable”.

“This problem will only get worse if left as it is, with the most vulnerable in our society being the ones to suffer,” he said. “Under our proposed system, everybody who gets free support from the state now will continue to do so and everybody else would be better off.

“Putting a limit on the maximum lifetime costs people may face will allow them to plan ahead for how they wish to meet these costs. By protecting a larger amount of people’s assets, they need no longer fear losing everything.”

The commission recommended the cap on lifetime contributions to social care costs should be set at between £25,000 and £50,000, but that £35,000 was “the most appropriate and fair figure”.

It is intended that a cap on care costs would help “stimulate” a market in insurance products to cover potential outlay in old age. Estimates have suggested the cost of insuring for care needs of £50,000 could be around £17,000 on retirement.

The commission said wide variations in eligibility and assessments for social care in the home provided by local authorities meant “people in very similar circumstances, with similar levels of need and financial resources, can be treated very differently and experience vastly different outcomes”.

It suggested that all those with “substantial” needs should receive support from councils as a minimum, while people should be able to take the level of eligibility for care with them if they moved house so it was not reduced if they went to live nearer relatives or to more appropriate accommodation.

But the report said local councils should be able to set their own rates for the cost of care, which vary substantially, depending on local prices for care packages.

It said it was important for the Government to ensure sustainable funding for councils to deal with existing and future pressures following reforms.

Mr Dilnot added: “The issue of funding for adult social care has been ignored for too long.

“We should be celebrating the fact we are living longer and that younger people with disabilities are leading more independent lives than ever before. But instead we talk about the ‘burden of ageing’ and individuals are living in fear, worrying about meeting their care costs.”

WHAT THE REPORT RECOMMENDS...

* Potentially unlimited lifetime contributions towards social care costs should be capped at £35,000.

* After the cap is reached, individuals would be eligible for full state support.

* The threshold, above which people are liable for their full care costs, should be increased from £23,250 to £100,000.

* National eligibility criteria and portable assessments should be introduced to ensure greater consistency for people with care needs.

* People should contribute a standard amount to cover their general living costs in residential care of between £7,000 and £10,000.

* Extra public funding for costs of social care will be needed, estimated at £1.7bn.